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question to the authors themselves. my question is really just around the -- how the amount of the $20,000 per unit came forward. i know that one of -- the thinking behind it is that fee can go into the affordable housing fund, which i understand is a great idea. but i'm just wondering how that number came forward. currently i know to enter the lottery you pay a certain amount of fee, so kind of the cost of that, the administrative fees, and going through a bypass. just in general, how that number came to be. >> supervisor farrell: to supervisor kim's question, when you go through the lottery, let's say you win the lottery or convert otherwise, there is a fee to start the process going forward. that fee will not be waived. that will continue in time. this is a new and separate fee. the dollar amount out of that nee came from the nexus study
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conducted, studying the effects of a condo converse study two years ago. happy to provide you with that. but that's where that fee emanated from. >> co-chair kim: in terms of depending on the number of years obviously that fee reduces down to $4,000. i know there's concern about whether $4,000 per unit can mitigate the loss of rent control units. beyond the normal existing procedure that we have currently for -- to ensure that there's sort of a metered rate at which we lose -- basically lose rent controlled units. >> supervisor farrell: i challenge probably the premise of that comment but i will say that the amount of fee reduction was a balancing act -- and to the city attorney can speak to further detail about that. we have to match that with the nexus study but also there is at a certain point a breakage point where people will not be incentivized to go forward and pay a fee. if they are seniority base you have a greater chance of winning
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the lottery. if you have missed it for x number of years you will be much closer going forward based upon seniority so therefore the incentive will not be there if you have to pay that higher fee. >> co-chair kim: the next set of questions were for the city attorney and this is around the lifetime leases. and i welcome the spirit of the intent, that comes behind that. of course my question is really around recent state law changes, or readings of the costa hawkins and that has flipped around in many ways how we deal with developers around the loss of rent control units, something that we saw both at trinity plazas and parkmerced. i'm curious with this, i understand that in some way there's a consideration in a sense because there's a reduction that we give in the fee but i'm curious as to the city attorney's thinking around the lifetime leases and also whether the city has the capacity to enforce these lifetime leases as well.
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>> city attorney: john malamut from the city attorney's office. we think that the legislation that's before you today, including the amendments, is something that would satisfy the requirements of both the ellis act and costa hawkins. in terms of enforceability, one of the things that's been added today, as part of an amendment, is that to take advantage of this program, the property owners would need to enter into a binding agreement with the city, that goes to the this th o the enforceability of the lifetime requirements. there is a program in the eastern neighborhoods that was part of the eastern neighborhoods zoning that addressed a similar issue to encourage property owners to build rental housing.
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and through that program, the city, at least in one instance so far, has approved a agreement between the property owner and the the city. in fact, it came before the board of supervisors in 2011. and the agreement provided for enforcement, as well as penalties, if there are any violation of the terms of the lifetime lease. that would be recorded against the property, and it would be a condition, as it's proposed in the current amendment, it would be a condition of being able to get the subdivision map that would create the condominiums. >> co-chair kim: and it's your belief that this would be something that would stand up to the palmer decision? >> city attorney: we believe so. this particular issue of the direct financial contribution, which is something that comes up in both the costa hawkins
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account as well as the ellis act, has not been litigated before, the specific item. but we feel that by giving a -- the combination of giving a refund to the fee, as well as allowing a bypass of the lottery process and the costs associated with that, that that creates a significant financial incentive as the trade-off for having the lifetime lease restrictions for example the nexus study that was prepared and is part of the clerk's file, indicates that the enhanced value of taking a project from its t.i.c. state, or a rental state, to a condominium, as an increase -- depending on the kind of project it is, the initial cost of the project, as an increase of 45 to 75,000 per unit, to go from a
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t.i.c. to a condo. and right now, the wait in the lottery is -- i believe this year, the oldest most senior group has participated for eight years. and there are enough of them that they will actually have to go through a lottery process. they won't be accepted automatically. so the concept would be that, by avoiding those delay costs of holding your property in the t.i.c. form verse, being able to go condo, separate yourself from the t.i.c. owners, and have your own separate mortgage home equity loan opportunities, that that creates a significant financial incentive, which would be the offset. >> co-chair kim: but this is an untested part of the law. there's no guarantee that -- one of the conveniences in the past, and i'm not stating either way, with parkmerced and trinity is we dealt with one landlord,
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essentially one property owner. in this case we could be dealing with hundreds of property owners that may or may not sue the city and kind of test the waters on this issue. so in that sense we don't have a guarantee of how the courts would rule on these lifetime leases in those instances. >> city attorney: i think that would be correct. what the city would do, in implementing this program, if it were adopted, is we would create a -- we'd have a standardized form agreement that all the property owners would be subject to. so it wouldn't -- in some ways, we wouldn't have separate agreements that address separate issues for the different property owners. >> co-chair kim: and the enforceability of these lifetime leases would that be under the city attorney's office or under dpw? >> city attorney: it would be -- the proposal right now is to have -- rather than have these agreements come to the board of supervisors, the agreement between the property owner and the city would be
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delegated to the director of the department of public works in consultation with the mayor's office of housing. >> co-chair kim: i understand that. i'm sorry. who would be doing the enforcement? where is the budget for the enforcement coming for this? and what department would that be housed under? >> city attorney: presumably the enforcement would come from the regulatory agencies, who are administering the program, so it would be department of public works in consultation with the mayor's office of housing, with advice from the city attorney's office. >> co-chair kim: thank you. my last series of questions before we go into public comment is actually to dpw. and so i'm curious as to whether you have set aside, within your budget, funding and staffing for the enforcement of these lifetime leases. >> restore city and count surveyor. no, we do not.
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>> co-chair kim: how do you expect -- and we don't have numbers, unfortunately, in terms of potential number of tenants that this would impact, or the number of lifetime leases that dpw would have to monitor, but as tenants start coming forward, perhaps to say that these leases are now being violated, i assume they would go to dpw but we don't have necessarily the capacity or funding or staffing to be able to address that, currently. >> currently, we do not. >> co-chair kim: my next set of questions is just on dpw's record of condo conversions. this is not an area i'm as familiar with. what we often talk about is how only 200 -- we only allow 200 units to be converted to condos per year here in san francisco. but the data that we show is that over the last 10 years, that actually 5,956 units have been converted over the last 10 years. this is double of what we've seen in the 90's. a number of this of course is
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because of the allowances or exceptions for two-unit t.i.c.s that we have here in san francisco. i'm really just confused by these numbers, particularly between 2005 and 2006. in 2005, 306 units were converted to condominiums, in 2006, it was over double, 727 units. now, when we have a lottery process of 200, plus a number of two-unit t.i.c.s that converted every year, i mean that spike was really alarming to me and it peaked at 845 units in 2008. and i'm just curious as to how that happened, the patterns around that, what you have seen at dpw. >> frankly, that's my fault. i made the process a lot more efficient. my staff made the process a lot more efficient. i was hired in 2005 and there was a horrendous backlog and we made the process more efficient.
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it doesn't reflect any change in the number of applicants. actually, the number of applicants were probably three or four years has declined, for a two-unit bypasses. the 200 unit cap on the condo lottery is the same every year. but the decline has been in the two-unit bypasses. >> co-chair kim: and so these spikes really were just in the two-unit condominiums. that were maybe backlogged over the last several years. but thanks to efficiencies that you had put in place in dpw were able to kind of fast track. >> without looking really close at them, i'd say yes. these were projects that were already in the pot. they were already in process. >> co-chair kim: that's a an amazing job, over double the units. maybe the numbers i have are not completely correct but i noticed
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between three to six units, that sometimes they're -- over 200 units were converted. maybe my numbers are wrong, but i wonder how that might happen. between three or six there's always 200 or less, there's no exceptions that go through? >> not for residential conversions. it's always 200 or less. >> co-chair kim: okay. so i'd be curious to know in 2009, you had 141 three-unit buildings, 132 four-unit buildings and 22 five to six units that were converted. am i reading that incorrectly? >> i don't... i suspect you're looking at -- there's probably conversions in there and new construction. new construction -- >> co-chair kim: i see. so new construction is also included in that as well.
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>> i'm not sure where those stats came from but i can assure you that 200 -- no more than 200 units a year get converted from existing residential units. >> co-chair kim: okay. thank you very much. >> sure. >> chair wiener: president chiu. >> supervisor chiu: a couple of additional follow-up questions to supervisor kim's questions. this is either to the controller's office or to the author of the legislation around the -- how the fee was set. when i looked at the controller's nexus study on how this was done, i understand this proposal creates a $20,000 conversion fee. and what the nexus study suggests is that that would be a potential fee that could be justified for $300,000 t.i.c., but for $400,000 t.i.c. the nexus study suggests that you could have a conversion fee of about $30,000 and for a half a million, $500,000 t.i.c. the nexus study suggests potential
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conversion fee up to $35,000. when you add that to the fact that this legislation allows for the $20,000 fee to be reduced by up to 80%, depending on where folks are in the lottery, in other words there are individuals that could go through and pay $400,000 and allow -- $4,000 and allow -- how did you peg the 20,000 and why did you choose a scale that allowed up to 80% to be taken off? >> thank you, president chiu, for that question. i think the bottom line is we did extensive outreach into the t.i.c. community to understand what fee levels would they say we don't want to take advantage of this, this legislation would be meaningless in terms there would be no people that would apply for this and pay the fees, they would rather go through the lottery, and also something that basically was not -- did not cost much money at all so it would be a given that they would apply. so we wanted to strike a balance
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between getting a fee that was high enough and reasonable, that would support our affordable housing community but something that was in reason so t.i.c. owners would take advantage ever it. we've heard the 20,000 fee is too high and they wouldn't go forward with that. it was a balancing act. this is a subjective division under the cap that the nexus study provided. >> supervisor chiu: i think we received communication from the affordable housing community, a letter from the council of community housing organizations that where the fee is set could reduce the affordable housing funding? >> essentially, the affordable housing community has suggested that where this fee is set could actually end up reducing support and funding for affordable housing because it again makes -- it doesn't create enough of a fee to make -- to create the proper incentives for folks to assist with affordable housing. >> i would be happy to speak
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with them or if you have more details, i don't believe in that earmt but happy to have that dialogue. >> supervisor chiu: to our city attorney on the questions around the protections that were put in place for tenants at say parkmerced versus the protections put in place here, first of all i definitely appreciate -- i want to say this to the supporters of this ordinance, life long leases, i think that was an important aspect of what you're proposing in the legislation but my recollection in parkmerced is in addition to the life long leases that were provided in that agreement because there are questions that were laid out around potential legal issues, in addition to the life long leases the developer in parkmerced was required to create an affordable -- essentially a fund of money that, if there are any legal issues or any legal challenges to these life long leases, the developer, parkmerced was required to set aside almost $200 million to compensate future tenants in case there
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were any issues and i wanted to just clarify, was a concept like that ever contemplated for this legislation? to me it strikes me that the protections for tenants in this measure are actually a bit less than what we did in parkmerced. >> john malamut from the city attorney's office. i was only tangentially involved with the parkmerced project but that project involved a development agreement, which is a recognized process in the california governmental code that allows seaptionzl essentiay and the developer to negotiate a deal without necessarily having fees be justified by a nexus study. so the agreement, which it sounds like you're mentioning, is something that we could ask for as part of a negotiated contract with the developer.
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in this particular case, the nexus analysis only supported the base fee that we were discussing about having moneys go into one of the city's affordable housing programs. >> supervisor chiu: okay. and one final question, again probably to the author of the legislation. i think there's no one here who doesn't have sympathy for the challenging financial situation facing current t.i.c. owners. i think a concern that's been raised and one that i have, and would like to get an initial sense from supervisor farrell and others, i think even if we were to allow the current generation of t.i.c. owners to allow them to condoize, the concern is that we would quickly replace them with a new generation of t.i.c. owners, and potentially additional real estate speculation that could lead us right back to an identical debate within a short period of time and that's fundamentally an issue that i
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have with this particular proposal. and i would love an initial i guess comment on that, and certainly if there are suggestions from the public on this but to me that seems to be a fundmental piece that i wish was addressed by the legislation. >> chair wiener: president chiu, that is inherently speculation, nobody knows. to believe one side or another to me is something that we should not be doing. two things that i would articulate. first of all owner occupancy rules dictate there needs to be owner occupancy for a number of years before this is to be eligible for the condo lottery. in most instances it's three years for a certain amount of tenants for larger buildings it gets more complicated. the even potential chance for that to happen is years down the road. second of all what i would articulate is -- and ask any of the t.i.c. owners that speak with us today -- the desirability of t.i.c.s
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especially because of the financing market over the last few years has gone down significantly. i've had a significant number of friends, people in my community that own t.i.c.s that when they try to sell them is much more challenging. so i would suggest the desirability of these units going forward would be significantly reduced. >> chair wiener: thank you. did you have more comments? >> supervisor chiu: i had one reaction or comment. i think that supervisor farrell's observation that the desirability of t.i.c.s might be reduced, that very well might be the case. i know there have been some suggestions of is there's way to take care of the current generation of t.i.c. owners but essentially move us away from what is clearly a fairly broken and controversial system that we have now. and i'm curious about people's reaction to that and i have a feeling it will likely be ongoing conversations about
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that. but if it is true that this will no longer be a path that is desirable, the question then remains, well should we continue to allow this path but we will have that discussion. >> chair wiener: supervisor farrell? supervisor kim. >> co-chair kim: i wanted to make a comment on that as well. while it may be speculation that legislation, such as a bypass, would spur more t.i.c. ownership over the next five, 10 years, it's still a poblth. possibility. if it could happen is there a way to safeguard against that. many of us are concerned with current t.i.c. owners. i disagree with the comment that they get demonized in san francisco. the groups that get demonized are the groups that encourage residents to go down this pathway. the solution is to build more
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units. unfortunately banking institutions create a financial tool by which people could buy entire buildings and decrease our rent control housing stock. what's unfortunate about this debate is we have two groups of folks here, both worthy of our attention and of course of our commitment and they are our renters, many of whom are low income and moderate income, homeowners. but i think many are demonizing the t.i.c. owners. i have friends who are t.i.c. owners as well. i think in the long-term if we're going to have a conversation about how to help the current generation of t.i.c. owners we have to have a conversation about how we prevent i would say kind of an overcapacityityization. we don't want to encourage banks and realtors to say san francisco is letting this
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bypass happen, it's going to happen in five years, so buy up today. i don't want to say cannibalize, but they will cannibalize our housing stock which is important to affordable housing in san francisco as much as our affordable housing program as well. >> chair wiener: thank you. i just have one question for mr. stores, and if there are no other comments we will get to public comment. just following up on a question that supervisor kim had for you a while ago about dpw's enforcement staff and understanding that in many different areas dpw doesn't have as much enforcement capacity as it should. right now, there are of course lifetime leases -- this isn't a brand new concept, that we have lifetime leases for senior and disabled tenants in converted buildings, correct? >> correct. >> chair wiener: and so if someone -- there are lifetime leases that exist currently in san francisco, and if someone believes that that lifetime
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lease is being violated, they can come to the department of public works and file a complaint? >> we don't maintain -- we don't adjudicate them at all. as far as i know that's either the mayor's office of housing or the rent board. >> chair wiener: so whatever process is used for current complaints about violating lifetime leases, the same process would apply for these lifetime leases. >> i'm not sure how to answer that. it's not really outlined in the the legislation. >> chair wiener: right. but the concept of a lifetime lease exists in san francisco law already. >> yes. >> chair wiener: and so this is not some sort of -- we're applying it beyond senior and disabled now but this is a lifetime lease and we have a lifetime lease in the law that's been in the law for quite some time. >> yes. >> chair wiener: thank you. okay, colleagues. if there are no other questions or comments, we will open it up
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to public comment. public comment will be two minutes. when you have 30 seconds left, you will hear a soft bell. when your time is up, you'll hear a louder bell. if you could please wind up. i'll call a group of people at a time. you don't have to line up in the exact order that i call you and proceed as one speaker ends, the next speaker can walk up to the mic. and if i do call anyone in the overflow rooms, please come into the board chamber. and if there's anyone who, because of a physical need or they have children with them, they need to speak early. you can just go ahead and line up without my having called you. we want to accommodate you. so i'll call the first batch of names. nancy mcnally -- and i apologize in advance. for i'm sure the numerous names i will butcher today, some because of hand writings and
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others because of other writin writings. iway sue, mainly sato, mark bridges, jaime alvarez, kenneth laverne, jane fox, jeremy michaels, donna safyoti johnson, renee givens, don hoe, max feraso, kelly, mark bridges, karen babette and sue vaughan. the first speaker can walk up. the first speaker can please... will the first speaker please walk up and be in public comme
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comment. >> [speaking foreign language] >> translator: i want to speak quickly because i have to pick up my son. my name is chin lo. i think all the citizens who are here has a goal. our goal is to live happily in san francisco. and we are very fortunate to live in san francisco. but in san francisco right now, living in san francisco has a pressure on us. first is the rent is too high. and for homeowners, the price is too high. the mortgage is too high.
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so right here, we just want to let the city know about our thoughts. so we hope everyone will support this proposal. if this proposal is passed, the tenants would be able to get a piece of fund to afford their housing. and our living in san francisco would be a little bit relaxed. and also the next generation of our tenants will be able to purchase housing in san francisco at a lower price.
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and as homeowners, we like our next generation to be able to purchase housing at a lower price too. all i know is that all this benefits will pass down to our next generation. whether you are tenants or homeowners, i am calling everyone to support this proposal. so that we, and our next generation, can live happily in san francisco. thank you very much

January 28, 2013 2:00pm-2:30pm PST

TOPIC FREQUENCY Kim 17, San Francisco 14, Chiu 8, Farrell 5, The City 3, Dpw 2, Us 2, Hawkins 2, John Malamut 2, Condoize 1, Costa Hawkins 1, Don Hoe 1, Realtors 1, Parkmerced 1, Chin Lo 1, California 1, Trinity 1, Sato 1, Jane Fox 1, Jeremy Michaels 1
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